EIOPA launched a consultation on its advice on the harmonization of national insurance guarantee schemes across the member states of EU. The consultation paper is a draft response to the call for advice by EC on insurance guarantee schemes. The consultation period ends on October 18, 2019.
EIOPA received, on February 11, 2019, the EC call for advice on the review of Directive 2009/138/EC2 (Solvency II). The call for advice covered a broad variety of topics, including all topics that EIOPA has started to work on such as insurance guarantee schemes and macro-prudential policy in insurance. EIOPA will respond to the call for advice in the form of a Solvency II Review Opinion, which will include a holistic impact assessment. The Solvency II Review Opinion will be published for consultation in the fourth quarter of 2019. The advice in this paper will be amended with the input of this consultation process and be included in the Solvency II Review Opinion, which will be submitted to EC.
The draft advice addresses the following areas of an insurance guarantee scheme:
- Role and functioning—Insurance guarantee schemes should be set up with the primary aim to protect policyholders, such as to pay compensation swiftly to policyholders for their losses in case an insurer becomes insolvent and/or to ensure the continuation of insurance policies
- Geographical coverage—Insurance guarantee schemes should be harmonized in accordance with the home-country principle
- Eligible policies—Insurance guarantee schemes should cover a specific range of life and non-life policies, such as policies where the failure of an insurer could lead to considerable financial or social hardship for policyholders and/or in case of lines of business with a high market share in cross-border business in Europe
- Eligible claimants—Insurance guarantee schemes should cover natural persons as well as micro- and small-size legal entities
- Coverage level—Insurance guarantee schemes should have a harmonized minimum coverage level
- Funding—Insurance guarantee schemes should have adequate funding systems in place; they should, for instance, be funded on an ex-ante basis and, if needed, complemented by ex-post funding
- Disclosure—There should be requirements for adequate, clear, and comprehensive disclosure about the insurance guarantee schemes protection to consumers and policyholders
- Cross-border cooperation and coordination—Respective arrangements between national Insurance guarantee schemes should be in place
Overall, EIOPA is of the view that every member state should have a national guarantee scheme in place for the protection of policyholders in the event of a failure of an insurer, which should meet a minimum set of harmonized features. Therefore, EIOPA calls for the establishment of a European network of national insurance guarantee schemes, which are sufficiently harmonized and adequately funded. Additionally, the proportionality principle should be taken into consideration to avoid excessive burdens on insurers and member states. In this context, a flexible approach for the legal structure and setup of the schemes is important. EIOPA advises to conduct a review at least every five years, after the harmonized framework becomes effective.
Comment Due Date: October 18, 2019
Keywords: Europe, EU, Insurance, Solvency II, Insurance Guarantee Schemes, Macro-Prudential Policy, Solvency II Review, EIOPA
The Hong Kong Monetary Authority (HKMA) revised the Supervisory Policy Manual module CG-5 that sets out guidelines on a sound remuneration system for authorized institutions.
The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).
In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.
The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.
The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.
The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.
The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.
The European Central Bank (ECB) published a paper as well as an article in the July Macroprudential Bulletin, both of which offer insights on the assessment of the impact of Basel III finalization package on the euro area.
The International Swaps and Derivatives Association (ISDA) published a paper that explores the impact of the Fundamental Review of the Trading Book (FRTB) on the trading of carbon certificates.
The Prudential Regulation Authority (PRA) published the remuneration policy self-assessment templates and tables on strengthening accountability.